EU Duties on Chinese Solar Panels Losing Member State Support

Monday, 27 May 2013 | 10:41 AM ETReuters

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A majority of EU governments oppose a plan to impose hefty duties on solar panel imports from China, a survey of member states showed on Monday, undermining efforts by Brussels to pressure Beijing over its trade practices.

The European Commission, the EU's executive, accuses Chinese firms of selling solar panels at below cost in Europe - a practice known as "dumping" - and plans to impose duties, making it far harder for China to gain market share.

The duties, averaging 47 percent, will come into force from June 6 for a trial period and could be withdrawn if both sides can reach a negotiated settlement. Chinese officials were holding talks with EU officials in Brussels on Monday.

The case is the largest trade case the Commission has undertaken, with around 21 billion euros of China-made solar panels sold in the EU. The duties are being proposed by the EU's trade commissioner, Belgian lawyer Karel De Gucht.

But fearful of losing business in China, Germany, Britain and the Netherlands are among at least 14 member states who oppose the sanctions, diplomats told Reuters.

The EU's 27 countries had until Friday to submit a formal, written response to De Gucht's plans. While the trade commissioner would still have the right to impose the duties, doing so in the face of member states' opposition would be hard.

Provisional duties will more than likely still go ahead on June 6, once they are published in the European Union's official journal, officials say, but the pressure to roll them back before they become permanent in December will be intense.

The split underlines the depth of division in the EU over how to deal with China, a critical market for many EU exporters and the region's second biggest trading partner over all.

Reuters spoke to 21 of the EU's 27 countries and confirmed that 15 - a majority - opposed the duties while six supported them. The other six either declined to say or were unreachable.

France and Italy are leading a group of countries who say De Gucht is right to go ahead with sanctions, arguing that China's rapid rise in solar panel output to more than the world's entire demand could not have happened without illegal state support.

Chinese companies have captured more than 80 percent of the European market from almost zero a few years ago.

De Gucht met China's deputy commerce minister for informal talks in Brussels on Monday, a day after Chinese Premier Li Keqiang and German Chancellor Angela Merkel, meeting in Berlin, called for an end to the dispute, as well as another conflict over Chinese telecoms companies accused of dumping in Europe.

Germany initially supported De Gucht's plans for duties, and it was a German company, Solar World, which first raised the complaint against Chinese dumping.

But rather than punitive measures, Merkel now appears to favour a negotiated solution, wary of the potential impact on German exporters if China were to take retaliatory steps.

"There is no need for more sanction measures," German Economy Minister Philipp Roesler told a news conference on Monday after talks with Li.

Trade Chief's Strategy

Although De Gucht says he had no intention of damaging European business interests in China, he wants to show Beijing that the Commission is serious about preventing dumping and that China must play by international trade rules.

"We want to see a balanced relationship between China and the European Union," said French Industry Minister Arnaud Montebourg. "Countries that use protectionism, and China is one of them, should accept reciprocal rules," he told reporters.

EU officials told Reuters earlier this year they were frustrated with the Chinese leadership's lack of engagement.

By levying provisional duties, the Commission feels it has leverage because under EU law, the sanctions could be cemented for up to five years from December if no solution is found.

According to a copy of the Commission's solar investigation obtained by Reuters, the Commission found clear evidence of dumping by Chinese producers.

"The Commission was presented with prima facie evidence that dumping occurred. They can't just ignore that," said Stuart Newman, a legal advisor to the Foreign Trade Association, a lobby group based in Brussels.